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FOREX-Dollar and yen rise as tech selloff sends investors to safety

Published 09/09/2020, 01:40
Updated 09/09/2020, 01:42
© Reuters.

* Dollar holds gains in Asia after tech selloff
* Yen hits 1wk high as investors head for safety
* Pound hammered on Brexit worries
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, Sept 9 (Reuters) - The dollar held its gains on
Wednesday, as a stockmarket slide spilled over into selling of
riskier currencies and an oil slump weighed on commodity
currencies, while fresh Brexit turmoil pushed the pound to a
six-week low.
The greenback sat by a one-month high against a basket of
rivals =USD and edged up against the pound, euro and the kiwi.
In early trade the safe-haven Japanese yen JPY=EBS rose to
a one-week peak of 105.83 per dollar as investors looked to
jittery equity markets to set the tone.
"U.S. equity futures will likely be a guide to currencies
today," said Commonwealth Bank of Australia's head of
international economics, Joe Capurso.
"The more equity futures fall, the larger the strength in
the dollar and the yen," he said, with a European Central Bank
meeting on Thursday a possible driver of even more dollar gains.
Some pressure came off riskier currencies as futures climbed
off early session lows, with Nasdaq 100 futures NQc1 turning
positive to gain 0.2% and S&P 500 futures ESc1 last down 0.2%.

The overnight currency moves came with gains in the bond
market as a tech selloff, which began last week with no apparent
trigger, begins to drive broader risk aversion. MKTS/GLOB
The risk-sensitive Antipodean currencies fell to two-week
lows, before climbing back to flat as stock futures pared
losses. The Australian dollar AUD=D3 last stood at $0.7215 and
the New Zealand dollar NZD=D3 at $0.6618.
A nearly 8% drop in U.S. crude prices has also weighed on
oil exporters' currencies, with the Canadian dollar CAD=D3
hitting a three-week low of C$1.3256 per dollar and the
Norwegian krone NOK= at its lowest since late July.
Sterling, however, has been the largest loser as fears grow
that Britain is preparing to undercut its Brexit divorce treaty.
Britain will set out its blueprint for life outside the
European Union on Wednesday, publishing legislation a government
minister acknowledged would break international law in a
"limited way" and which could sour trade talks. The pound GBP= , which fell 1.5% against the dollar
overnight, edged lower to a six-week trough of $1.2962 in Asia
and has lost nearly 4% in a little over a week. It also hit a
six-week low against the euro, of 90.57 pence EURGBP= and has
fallen 2.6% to 137.38 yen in three sessions GBPJPY=R .
The tech selloff, which has led Wall Street indexes on their
sharpest three-day drop since March has also added some impetus
to a dollar bounce that analysts have doubted.
The dollar has now lifted 1.4% from its early-September
trough, making particular progress against the euro in the wake
of comments from ECB chief economist Philip Lane, who said last
week that the exchange rate mattered to monetary policy.
The ECB meets on Thursday with any comments on the currency
to be closely parsed.
"Lane appears to have succeeded in drawing a line in the
sand at $1.20 at least for the time being," said Rabobank senior
FX strategist Jane Foley. "We see scope that euro/dollar could
dip further towards the $1.17 level on a one-month view."
The euro EUR=EBS last traded at $1.1772.

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